Friday, June 16, 2017

Robert Pringle - The Ikon: The Best World Money

We have featured articles by Robert Pringle (former Group of 30 Director) for some time here on the blog. He has a new article out on his blog (The Money Trap) where he outlines his idea for a new global reserve currency that could be used to replace the US dollar some day. His proposed global currency (the Ikon) would be anchored to a basket of world equities. You can read the full article here. Below are a few excerpts. Further below, see his additional comments to me on how the Ikon would work.

"States cannot create good money. They are interested parties. A good monetary system should discipline states – i.e. hold them to account. A state-run money cannot do that. That is the flaw in proposals such as those made by Positive Money and The International Movement for Monetary Reform."

. . . . .

"A good money must also be the global standard – a standard that individual countries will voluntarily join. Only then can money’s chief benefits be obtained. Only then can the huge economies of scale be achieved.

In The Money TrapI argue that the best numeraire would be a new currency standard that I have called the “Ikon”. This refers to a basket of world equities. Everybody holding money would then have a personal stake in the future prosperity of the world and be induced, as if by an invisible hand, to work towards it."

"In all other respects, money tied to global equities would behave exactly as in the gold standard. . . . ."

. . . . .

"Monetary policies based on nation states, independent central banks, and floating exchange rates have reached their last stage of development. The doctrine of inflation targeting by independent central banks is a recipe for general financial instability. It will not survive another crisis. Nor will the current banking system. All these structures are propped up by governments/taxpayers’ money."

Added note: I reached out to Mr. Pringle with an additional question about his proposal for the Ikon. Below is our email exchange on it. A thank you to Robert Pringle for such a detailed reply and explanation for how his idea would work.

My question is:

What entity would issue the Ikon and administer it over time? The IMF? Some new entity?

As a comparison, Dr. Coats Real SDR would be issued and administered by a Currency Board.

Reply from Robert Pringle:

The Ikon can be issued by a currency board also, or by the IMF or BIS. I think there is an advantage in having a distinctive asset as the anchor - and also one for which there is a demand independent of its role as money.

Here are some more background details for your interest.

Basically it is a system for doing away with central banks and currency manipulation by officials or the government. The real value of money would rise with increases in productivity, as prices fell in terms of the money, Ikon. When the system is fully developed, there would be no exchange rates. People would see that the value of their money depended on the efforts and creativity of the entire world, everybody could see and feel the inter-dependence of all people in the global money space, without the veil of money. There would be no easy pickings for the people who make money merely on speculating on monetary policies, exchange rates, debt, etc.

The general level of share prices would be held constant in terms of money. By offering to sell or buy a representative basket of stocks at a fixed price, the currency board would regulate the quantity of money automatically as currency boards like Hong Kong do now. No discretion.

There are various ways of putting this idea into effect. I would prefer to have money backed 100% by actual holdings of stocks; these stocks wold be chosen to represent all the stocks on the world’s regulated equity markets (there would need to be supervision of the integrity of such markets). When the price of the index rose above the fixed rate, the Ikon currency board would be obliged to sell stocks from its portfolio, reducing money in the hands of the public and causing deflation. If prices of stocks in the basket fell below the fixed rate, the Board would buy stocks from the public, increasing the money supply, until the price came back to the fixed rate. In practice, markets would soon expect this to happen and there might be, little need for intervention.

Of course, prices of individual stocks would continue to be volatile, as they would move in response to news about their future earnings.

Through this process, the prices of assets in general would be controlled to a much greater extent. Borrowing would be expensive as the value of money to be paid back would in real terms often be higher than the amount borrowed. Financing would take place mainly through equity markets, as under the gold standard. Thus speculation on the future prices of assets would also be expensive.

Hope this helps.

All best wishes and thanks again for your interest,

Robert

-------------------------------------------------------------------------------------------------------------Mr. Pringle expands on how the Ikon would fit into a reformed global monetary system in this new article on his blog. These articles illustrate that there is ongoing discussion and debate around the world on how best to reform the present monetary system and that there are a variety of creative ideas out there. Mr. Pringle also advises me that he thinks events may be shaping up that would allow for ideas like the Ikon to be considered.

Notice:

This site uses cookies from Google to deliver its services, to personalize ads, and to analyze traffic. Information about you use of this site is shared with Google. By using this site, you agree to use of its cookies. The author of this blog does not use any cookie information for any purpose.